Keller Asia Pacific Ltd. Vs ACIT (ITAT Delhi)
Conclusion: Recurring advisory/consultancy services without transfer of know-how/technical skill did not satisfy “make available” requirement under Article 12(4)(b) DTAA and therefore, payments couldn’t be taxed as FTS.
Held: Assessee, a Singapore-based company providing ground engineering services, rendered management, consultancy, IT, legal, marketing, and human resource services to its Indian AE, Keller Ground Engineering India Pvt. Ltd., under a Management Services Agreement dated 01.01.2016. AO treated the management fees received as Fee for Technical Services (FTS) under India-Singapore DTAA, alleging that services made technical knowledge/skill available to Keller India. Assessee contended that services were advisory/consultancy in nature, did not transfer any technology or know-how, and IT services were already offered to tax. DRP upheld AO’s draft assessment order. Assessee appealed to ITAT. The issue arose for consideration was whether the management fees received by assessee constituted FTS under Article 12(4) of India-Singapore DTAA. It was held that for a payment to be considered FTS under the India-Singapore treaty, the crucial “make available” condition must be met. This means the service provider had to empower the recipient with knowledge or skills, enabling them to apply the technology or process independently in the future. Moreover, perusal of Management Services Agreement and sample communications showed no transfer of know-how or technology; services were recurring support/consultancy. The court found that the services provided were merely advisory and didn’t impart any such capability. Since the “make available” test failed, the payments couldn’t be taxed as FTS.
